The Finance (Amendment) Ordinance 2012
promulgated by the president recently, has attracted mixed response from people
hailing from different walks of life.

Even people within the stock market
have mixed feelings but those outside the financial world are questioning why
fatties need to be given further protection from scrutiny of the origins of
their funds.

This ordinance has suspended certain
provisions of the law and consequently the tax authorities would not be able to
inquire where money invested in the stock market has come from.

Those supporting the move, including
the securities and exchange commission Pakistan (SECP), are of the view that the
benefits are clear: money from outside the formal, documented sector will be
invested in the stock market, providing a boost to the market and the tax
authorities - because the investments will be taxed - and for the ultimate goal
of increasing the documentation of the economy.

Encouraging money from the 'informal'
or undocumented economy to enter the formal economy is a process that should be
encouraged.

A well-functioning and robust stock
market is necessary but without additional reforms and changes, analysts
believe.

According to them, the capital market
in Pakistan had played a positive role in the development and expansion of the
economy. Like other sectors of the economy, the capital market has also done
remarkably well, although there is a lot of room for further improvement.

They said capital market in Pakistan
has witnessed rapid progress through structural reforms in both its
institutional setup and operational matters. Although government has an
important role to play in shaping the legal, institutional and business
environment, major responsibility still rests with the corporate sector to
achieve a higher level of corporate governance.

They stressed that high standards of
corporate integrity and excellence are of fundamental importance for the
development of any capital market. They urged the need to focus on achieving the
highest standards of corporate governance, transparency, and professionalism in
order to strengthen investors' confidence.

They further said that reforms
introduced by the SECP to provide transparency and better governance of the
capital market need to be recognized and appreciated, as they would provide
solid foundations to attract more investors domestically and internationally.

The reforms introduced in the fields of
risk management, governance and transparency have contributed significantly
towards the growth and development of capital market, and building of investor
confidence, they opined.

They said that greater efforts need to
be undertaken for introduction of Islamic products considering the growing
global trend towards Shariah-compliant investment alternatives. Additionally,
measures should also be taken for development of debt capital markets, commodity
and currency markets, mutual fund industry, and real estate investment trusts.

About the Presidential Ordinance,
experts said the situation was not conducive for economic growth in Pakistan as
industries were closing and shifting to Bangladesh while GDP growth rate was two
per cent. In such scenario, the ordinance for stock market investment would
temporally improve the situation, they said.

According to them, perception of money
whitening through the ordinance about stock market investment was wrong but it
would reduce the fear of investors and ensure them that their investment was
protected.

They said that economic growth was
impossible without capital market growth. The economy could get investments from
banks or stock markets and the new ordinance would pave the way for investments,
they opined.

In the developed countries, bank
deposits are lower than capital market investments while the situation is
altogether different in Pakistan, they said.

They observed that the new ordinance
would facilitate capital market and the tax collection from stock market would
improve by it. They suggested the government to impose the condition of three to
five years investments in stock market under this ordinance as investment made
through this ordinance would whiten black money.

They said the new ordinance would bring
dual taxation in the capital market, capital gains tax, and capital value tax,
but it would bring the investor in tax net from day one. They said the existing
situation of the country was not favorable for stock market but the ordinance
had enhanced the market trading turnover.

On the other hand, opposing the
recently promulgated Finance (Amendment) Ordinance, 2012, PML-N senior leader
Muhammad Parvez Malik said that the move would open doors for money laundering
and legalization of black money by making huge investment in stock exchanges.

He termed the ordinance as the worst
example of money laundering, as it would allow legalization of undisclosed
income and assets earned through illegal means.

According to him, this ordinance has
been specially promulgated to facilitate sitting rulers who would now be in a
position to legalize their black money by investing in stock exchanges.